Marketing strategy for poca snack 2012 – 2015

The leader paves the way to take Business unit, product and market levels Company level Define the mission Estapblish strategic objectives Design the business porfolio Make plans, m

NGUYEN THI MY NGOC

MARKETING STRATEGY FOR POCA SNACK

2012 – 2015

MASTER PROJECT MASTER IN BUSINESS & MARKETING MANAGEMENT

Tutor’s Name: Dr Nguyen Minh Kieu

Ho Chi Minh City (2012)

MBMM5

CERTIFICATE

I certify that the substance of this project has not been submitted for any other degree and

is not currently being submitted for any degree or qualification

I also certify that, to the best my knowledge, any help received in preparing this project, and all the resources used have been acknowledged in this project

Signature:………

NGUYEN THI MY NGOC

ACKNOWLEDGEMENTS

Firstly, I would like especially to acknowledge my Direct Professor, Dr Nguyen Minh Kieu – Vice Dean of graduate office from HCMC Open University, for his guideline, advice, support and contributions throughout this project

Secondly, I also want to acknowledge Dang Thanh Hung – Marketing Manager for his comments on the project’s methodology and valuable experience in doing project I also grateful thank the Marketing Department of Pepsi International Company for their supporting data on my cases study

Next, I also wish to thank Prof Olivier Kupferman of the subject Marketing & Business Planning and Prof Jean – Pierre Baeyens of the subject Strategic marketing for their theory

I am particular great thank the founders of this study program, Prof Tran Anh Tuan who create opportunity for me to study this useful program as well as all professors and coordinators of this study program

Finally, I am grateful for my family, my friends, my classmates for their support and encouragement to pursue this study successfully

TABLE OF CONTENTS

 Certificate Page i

 Advisor’s comments Page ii

 Acknowledgements Page iii

 Table of contents Page iv

 List of abbreviations Page vi

 List of tables and figures Page vii

CHAPTER 1: INTRODUCTION Page 01

1.1 Rationale of the study Page 01 1.2 Objective of the study Page 01 1.3 Scope and limitations Page 01 1.4 Research method Page 02 1.5 Structure of study Page 02

CHAPTER 2: LITERATURE REVIEW OF MARKETING STRATEGIES Page 03

2.1 Concept of Marketing Strategy Page 03 2.1.1 Definition of Marketing Strategy Page 03 2.1.2 Marketing strategy process Page 03 2.2 Marketing Strategies Page 04 2.2.1 The Competitive strategies Page 04 2.2.1.1 Market leader strategies Page 04 2.2.1.2 Market – challenger strategies Page 06 2.2.1.3 Market follower strategies Page 07 2.2.1.4 Market niches strategies Page 08 2.2.2 The Product life cycle strategies Page 09 2.2.2.1 Strategies for the introductory phrase Page 09 2.2.2.2 Growth strategies Page 10 2.2.2.3 Strategies for Maturity Page 10 2.2.2.4 Strategies for decline Page 11

2.2.3 The product line strategies Page 12

CHAPTER 3: THE MARKET ANALYSIS Page 15

3.1 Marketing environment analysis Page 15

3.1.1 Macro-environment analysis Page 15

3.1.1.1 State of the world Page 15 3.1.1.2 State of economic development in Vietnam Page 16 3.1.1.3 Demography in Vietnam Page 16 3.1.1.4 Social trend in Vietnam Page 18 3.1.1.5 The government promotes local products Page 18 3.1.1.6 Environment concerns Page 19 3.1.2 Micro – environment analysis Page 19

3.1.2.1 Market analysis Page 19 3.1.2.2 Distribution trend Page 22 3.1.2.3 Competitor information Page 26 3.1.2.4 Customer insight Page 35 3.2 Pepsi International and Poca brand information Page 41

3.2.1 Pepsi International information Page 41

3.2.2 Poca snack information Page 42

3.2.3 Poca Sales performance Page 43

3.2.4 Poca Marketing performance Page 49

3.3 Poca SWOT analysis Page 51

CHAPTER 4: MARKETING STRATEGIES 2012 – 2015 Page 53

4.1 Vision and Mission Page 53

4.2 Marketing Objectives Page 53

4.3 Marketing Strategies from 2012 to 2015 Page 53

4.3.1 Overall strategies for Poca snack category Page 53

4.3.2 Competitive strategies Page 55

4.3.2.1 Strategies for Potato Chip Page 55 4.3.2.2 Strategies for Extruded snack Page 55 4.3.2.3 Strategies for Peanut Page 57 4.3.3 Marketing mix strategies Page 58

4.3.3.1 Product strategies Page 58 4.3.3.2 Price strategies Page 65 4.3.3.3 Place strategies Page 65

4.3.3.4 Integrated marketing communication strategies Page 67

CONCLUSION Page 70

APPENDIX Page 71

REFERENCES Page 75

LIST OF ABBREVIATIONS

FMCG: Fast moving customer goods

GDP: Gross Domestic Product

SWOT: Strengths, Weakness, Opportunities, and Threats

CEO: Chief Executive Officer

PR: Public Relationship

GT: General Trade

R&D: Research and Development

BCG: Boston Consulting Group

SBU: Strategic business unit

CPI: Consumer Price Index

CAGR: Compounded Annual Growth Rate

IMC Integrated Marketing Communication

LIST OF TABLES & FIGURES

FIGURE

Figure 2.1: Strategic planning process Page 04 Figure 2.3: The BCG growths – share matrix Page 12 Figure 3.1 Total Vietnam Population 2009 Page 17 Figure 3.2: Sales of Package Food by Category: Value 2005-2010 Page 20 Figure 3.3: Sales Sweet and Savoury Snack by Category: Value 2005- 2010 Page 20 Figure 3.4: Sales Growth of Sweet and Savoury Snack Page 21 Figure 3.5 : Share of Sales Sweet and Savoury Snack by Category

2010 vs 2005 Page 21 Figure 3.6: Sales Sweet and Savoury Snack by Category: Value 2010 – 2015 Page 22 Figure 3.7: Total Vietnam Share of Trade Page 23 Figure 3.8: Brand Loyalty Page 24 Figure 3.9: Sales of Sweet and Savoury Snack by Distribution format:

% Analysis 2005 – 2010 Page 24 Figure 3.10: Penetration Rate for each SKU / CHANNEL Page 25 Figure 3.11: Sweet and Savoury Snack Company Share 2009 Page 26 Figure 3.12: Sweet and Savoury Snack Brand Share 2009 Page 27 Figure 3.13 Tan tan’s Portfolio Page 29 Figure 3.14: Kinhdo’s Portfolio Page 31 Figure 3.15: Orion’s Portfolio Page 32

Figure 3.16: Oishi’s Portfolio Page 34

Figure 3.17: Ratios of Snack usage Page 35 Figure 3.18: Frequency of Usage Page 37 Figure 3.19: Place to buy Snack Page 38 Figure 3.20: When to buy Snack Page 38 Figure 3.21: Where to buy Snack Page 40 Figure 3.22: Who to buy Snack with Page 40 Figure 3.23: Reasons to eat Snack Page 41 Figure 3.24: Benefit to eat Snack Page 41 Figure 3.25: Poca snack’ categories’ portfolio Page 43 Figure 3.26: Sales of Poca snack: Value 2006 – 2011 Page 44

Figure 3.27: Sales of Poca Snack: % value growth 2006 – 2011 Page 44 Figure 3.28: Sales of Poca Snack by Category: % analysis 2011 Page 45 Figure 3.29: Sales of Poca snack by Distribution: % analysis 2011 Page 45 Figure 3.30: Sales of Poca snack by Distribution: % analysis 2011 Page 46 Figure 3.31: Value map of Poca Snack Page 47 Figure 3.32: Price index in Potato chip 2011 Page 48 Figure 3.33: Price index in Extruded snack 2011 Page 48 Figure 3.34: Price index in Peanut 2011 Page 49 Figure 4.1: Poca BCG Matrix Page 54 Figure 4.2: Poca snack products life cycle Page 58 Figure 4.3: A vertical marketing system of Poca Snacks Page 66

TABLE

Table 3.1: GDP Real Growth rate and Inflation rate, CPI Year average (%) Page 16 Table 3.2: Pocato chip Brand Equity 2011 Page 49 Table 3.3: Extruded snack Brand Equity 2011 Page 50 Table 3.4: Peanut Brand Equity 2011 Page 50 Table 4.1: Poca BCG Matrix Page 54 Table 4.2 Marketing Mix for Poca snacks Page 59 Table 4.3: Poca snacks’ targeting Page 60 Table 4.4: Poca snacks’ positioning Page 61 Table 4.5: Poca snacks pack sizes and flavors Page 62

1

CHAPTER 1: INTRODUCTION

1.1 RATIONALE OF THE STUDY

It is expected that sweet and savory snack’s performance in Vietnam will be good given increasing consumer demand and improved living standards People will consume all kinds

of snacks and indulgence food in general and potato chip in particular However, due to the fact that per capita consumption for sweet and savory snacks, which called snack market,

in Vietnam is still relatively low compared to neighboring countries, the potential for market expansion in the near future is huge Better economic condition will revive consumers’ confidence in spending which is another important factor to drive sales growth

of this sector Therefore, this market is really attractive and it should be invested in more to create a bigger market size

Although joining quite late in Vietnam market and not strong in FMCG (Fast moving customer goods) distribution, Poca, a brand of Pepsi International, increases significantly and becomes one of big players in Vietnam snack market This is the reason why I think Poca snack categories enough ability to undertake to make the total snack market develop

in the future

1.2 OBJECTIVE OF THE STUDY

The project will give readers the overview of the snack market It also identifies the key factors which Poca snack categories could take advantages in its market and indicates sustainable strategies to apply from 2012 to 2015

1.3 SCOPE AND LIMITATION

The project mainly studies on sweet and Savoury snack market, which is contributing considerable sales of Poca snack categories in particular and Pepsi International in general

Furthermore, it uses the secondary data, Retail Audit Report (Nielsen, 2011) to have the comprehensive potato chip market view in Vietnam in general, the Poca situation in particular It also uses Pepsi International internal data in order to understand more the Poca brand and their competitors

Next, this project still uses the research report about target customer’s behavior and attitude in snack in Ho Chi Minh City This could a good base to make us understand more about them, the reason why they use snack, and what they expect about snack products There are 200 questionnaires delivered via email and in direct to the respondents living in

Ho Chi Minh City Besides, they are the main targets of snack product, including aged children (3 – 14 years old), Teenagers (15-19 years old) and Young adults (20-29 years old) The response is 120 After filtering, a number of questionnaires were eliminated due to many missing values The data were based on 100 qualified questionnaires – the sample for analysis

School-1.5 STRUCTURE OF STUDY

The project consists of four chapters The project has the following structure

Chapter 1 introduces the project basic, such as rationale of the study, objectives, limitation

of the research, and research method

Chapter 2 mentions the theoretical foundation of marketing strategies

Chapter 3 talks about the Pepsi International Company and Poca snack information It

also supplies with market overview, such as the snack market, the competitor situation, the customer insight and the Poca S.W.O.T analysis All of them are strong foundation to set the objectives and strategies

Chapter 4 deals with its objectives and strategies to gain these objectives for the period

2012 – 2015

2

CHAPTER 2 - LITERATURE REVIEW OF

MARKETING STRATEGIES

2.1 CONCEPT OF MARKETING STRATEGY

2.1.1 Definition of marketing strategy

Strategic Marketing plan is a plan that describes how a firm will adapt to take advantage of opportunities in its constantly changing environment, thereby maintaining a strategic fit between the firm’s goads and capabilities and its changing market opportunities (Kotler, 1999) It means Marketing Strategy is a marketing mix which designed for and aimed at a specific target market in order to achieve advantage for the organization through its configuration of resources within a challenging environment, to meet the need of markets and to fulfill stakeholder expectations in the long-term

Urban (1990) said that Marketing strategy requires a definition of the market domain in which the company will compete and a statement of how utility and value will be created for customers through product and service offerings Recognizing customer needs and filling them better than competitors is the core of successful marketing strategy

Marketing strategies usually include the following dimensions (Dalrymple and Parsons, 2000): (1) the product or service market in which you expect to compete; (2) The level of investment needed to grow, maintain, or milk the business; (3) The product line, positioning, pricing and distribution strategies needed to compete in the selected market; (4) the assets or capabilities to provide a sustainable competitive advantage

2.1.2 Marketing strategy process

Strategic planning sets the state for the marketing plan The figure 2.1 will illustrate the Marketing strategy process It begins with its overall purpose and mission These guide the formation of measurable corporate objectives A corporate audit then gathers information

on the company, its competitors, its market, and the general environment in which the firm competes A SWOT analysis gives a summary of the strengths and weaknesses of the company together with the opportunities and threats it faces

Next, headquarters decides what portfolio of business and products is best for the company and how much support to give each one This helps to provide the strategic objectives that guide the company’s various activities Then each business and product unit develops details marketing and other functional plan to support the company wide plan Thus marketing planning occurs at the business unit, product and market levels It supports company strategic planning with more detailed planning for specific marketing opportunities

Figure 2.1: Strategic planning process

Sources: Principles of Marketing (Kotler 1999)

2.2 MARKETING STRATEGIES

2.2.1 The Competitive strategies

According to the Arthur D, Little consulting firm, a firm can work on four competitive positions for its target market The market leaders possess 40% market share, the market challengers have 30 % market share Another 20 % and 10 % is occupied by the market follower and market niches respectively

2.2.1.1 Market leader strategies

Market leader is one who has the largest market share in the relevant product market The market leader usually leads the other firms to change prices, introduce new products works

on distribution coverage and other promotional activities The leader paves the way to take

Business unit, product and market levels Company level

Define the

mission

Estapblish strategic objectives

Design the business porfolio

Make plans, marketing strategies and orther stratgegis

up challengers for the competitive from There are three main strategies which market leaders could apply

Expanding the total market

The dominating firm can expand its market share by identifying new users, new uses for its products and more usage (convince people to use more per occasion) The Johnson & Johnson brand is a typical example for the new users Most people know Johnson & Johnson is the brand for children However, in recent years, it expands their target customers by communicating that women could use its products if they would like their skins soft like children skin P/S brand will good example illustrates to more usage In the past, Vietnamese usually brushed their teeth once a day After that, P/s, a toothpaste brand, communicates that if people would like to have good tooth, they should brush 3 times a day This campaign made not only P/S but also other toothpaste brands increased their sales significantly

Defending market share

The marketer while trying to expand the total market share must defend its current business against the immediate competitors There are six defense strategies that a dominant firm can adopt to depend its market share

(1)The position defense strategy: the firm builds a strong position around one’s territory

Simply defending one’s current position or products rarely works

(2)The flank defense strategy: when trying to hold its overall position, the market leader

should watch its weaker flanks closer Smart competitors will normally attack the company’s weaknesses

(3)The preemptive defense strategy: the firm should launch the product before the

competitor starts its offence against the leaders

(4)The counter defense strategy: the market leaders respond only when they have been

attacked by their competitors The leader will not remain cool in the face of a competitor’s price cut promotion activities, product prevent and sales territory invasion The leader worked on the strategic choice with the attackers by launching a serious marketing program, thus the cutting the attackers base of operation itself

(5)The mobile defense strategy: the marketer depends aggressively on their own territory

more than the leader does Here the leader stretches its area of operations over many new territories so as to serve for the future It usually does through market broadening and market diversification

(6)The contraction defensive strategy: When the companies can no longer depend all their

own territory, because of competitors, then the best action could be “strategic with drawal” This means the companies do not go for complete market abandonment but with drawing from the weaker territories and strengthening the strong territories

Expanding the market share

The leaders can improve their profits by increasing their market share It is vital to identify the variables offending the profits In fact, gaining increased market share depends upon the strategy the companies are adopting from time to time

2.2.1.2 Market – challenger strategies

Companies that have occupied second or third position in an industry are called as runner

up Since these firms attack other competitors more aggressively to gain market share are called market challengers To fulfill above, the companies can make use of the five

following attack strategies

(1) Frontal attack

Frontal attack is also called as “head on” attack, which means it hits right against its opponents strengths than its weaknesses In frontal attack, the firm matches its competitors product, advertising price etc here, the firm which has greater manpower resources will win the game, but if the defender has greater efficiency and holding a huge market share, this may turn out to be a master stock

An alternative to pure frontal attack is that the market challenger can launch a modified frontal attack by cutting its price from that of the competitor product In such instances, these can work if the market leader also does not reduce the price and convince the market that it is better sold when the price is lowered but product is quite equal to that of the competitors

(2) Flank attack

Here, the defender is strongest where it expects to be attacked The attacker or aggressor may attack the strong side of the defender In the marketing sense, flank attack is very attractive to the aggressor when the resources are less than the opponents

In flank attack, the aggressor firstly spots the areas where the opponent is under performing (geographical attack); secondly, it covers the unconverted market needs that is yet to be served by the competitors (leaders) Flank attack helps the market challenger shifts in market segments and develops strong segments

(3) Encirclement attack

The market challenger attempts to capture a wide slice of the defender’s territory It means attack on several fronts, so that the defender protects its front sides and rear simultaneously The main intention of the aggressor is to serve the market everything that defender and believes that a swift encirclement will break the goodwill of the opponents

(4) By-pass attack

This strategy is the most indirect It means by passing opponents and attacking easier markets, with the available resource This strategy calls for (a) Diversification into related products, (b) Diversification into new geographical markets, (c) Look for are technologies for it existing product lines

(5) Guerrilla attack

It means intermittent attacks on an opponent’s different territories This includes price cuts, incentives promotional activities and occasional legal actions The main aim of using such strategy is to hold a permanent position in the opponents’ territory This is usually practiced by smaller firms and most suitable for financially weak challengers Guerrilla campaign can be very expensive, but it is more a preparation for war than war itself

2.2.1.3 Market follower strategies

Product imitation might be profitable as compared to product innovation Therefore, there are many companies which prefer to follow rather than to challenge the leader No wonder the leader can still stay in the battle to match quickly the followers product attributes thus

by diffusing the attack In such case, the follower must know how to retain the existing customers and win over competitive customers

Each follower brings distinctive advantages to its target segment in term of location services and financing Since the follower may be a major target of attack by challengers, it must always keep it manufacturing cost low and produce good quality products with service back us It should also enter never markets as opportunity exists

The followers do have some definite goals and defined growth path; they may not be a carbon copy of the leader The four follower strategies are:

(1) Counterfeiter: The follower duplicated the leader’s product and package and sells it in

black market or through non-reputed leaders

(2) Cloner: The following (or) Cloner copies the leader’s product, distribution, and

advertising The Cloner product and packaging may resemble the leader’s product but the brand name is slightly different scubas “Reynolds” instead of “Reynolds”

(3) Imitator: The follower (or) imitator copies some things from the leader’s product but

maintains differentiation through packaging, advertising and pricing In fact, the imitator helps the leader the charge of monopoly

(4) Adaptor: The follower (or) adaptor takes the leader’s products and improves upon

them Here the adopter will sell in different markets to avoid direct co petition by the challengers or leaders According to Juck Welch CEO of GE, each business unit must reach number one or two position in its market as otherwise follower ship is not advisable

or rewarding

2.2.1.4 Market niches strategies

The follower can become a leader in a small market or niches particular market rather than following the leader, or competing with largest firms Niching also bears a certain amount

of risk since the larger firms may invade and turnout niche into a super segment

The key idea in nichermanship is specialization (Kotler, 1999) The firm has to specialize along market, customer, product or marketing mix lines The success of niche always lies

in specialization The nichers usually play following specialist roles

(1) End-use specialist: the firm specializes in serving one type of end-use customer For

instant, a law company specializes in criminal law

(2) Vertical-level specialist: the firm specializes at some level of the production

distribution cycle For example, Innity digital company specializes in book ad banners on internet for global advertising companies in Vietnam

(3) Customer-size specialist: the firm concentrates on selling to small, medium or large

customers Many nichers specialize in serving small customers neglected by the large companies

(4) Specific-customer specialist: the firm limits its selling to one or a few large customers

For example, Teal makes tables and chairs for hospitals

(5) Geographical specialist: the firm sells only in a certain local a certain locality, region

or area of the world

(6) Product or feature specialist: The firm specializes in producing a certain product,

product line or product feature

(7) Quality – price specialist: the firm operates at the low or high end of the market For

example, Ha noi mart always offers products for working class by cheap price strategies

(8) Service specialist: the firm offers one or more services not available from other firm

For example, Dominos pizza is the first pizza company specialize in offering delivery service by order online and calling

2.2.2 The Product life cycle strategies

Depending on the stage of the product life cycle, the marketing strategy should vary to meet the changing conditions The marketing mix consists of the product, promotion, price, and distribution Each element must change with the product life cycle if the company expects to maximize sales and profits It is important to note that as products move through each stage of the life cycle, they should be monitored and re-evaluated in terms of reducing both production costs and the time it takes to make a product or service profitable with its new position Strategic options for products during the product life cycle are examined below

2.2.2.1 Strategies for the introductory phrase

The introduction stage starts when the new product is firstly launched in the market There are some features to recognize this stage Firstly, the growth rate and the size of the market are low There are normally one or few companies, the pioneers of this category while the consumers’ need has just been appeared and the consumers have a low awareness in this kind of product Secondly, the profits are negative or low because of the low sales, high

distribution and consumer promotion expenses If these pioneers are successful in building consumers’ demand, it makes an attractive segment to others

At this period, the company usually runs these strategies to develop this stage, as follows: the first priority is to increase brand awareness and explain the function of products by advertising, Publish Relationship (PR), sales forces On the other side, the company also encourages product trial by sampling, promotions as well as brand activation In addition, the products are distributed in selective channels (general trade and modern trade) where its visibility is highest for selling Consumer’s price can be high or low depending on the initial strategy of the firm

2.2.2.2 Growth strategies

Growth stage is a stage which product starts strongly developing in the market, including costs reduced due to economies of scale; Sales volume increases significantly; Profitability begins to rise; Public awareness increases At this stage, competition begins to increase with a few new players in establishing market The increasing competition leads to price decreases

At this stage, the product management team usually runs these strategies to reinforce the rapid development of their product as follow: (1) Engage in product modification; (2) Build selective demand; stress differentiation; (3) Move toward intensive distribution

2.2.2.3 Strategies for Maturity

Maturity is a period of slowdown in sales growth because the product has achieved

acceptance by most potential buyers Profits level off or decline because of increased marketing outlays to defend the product against competition

At this stage, the sales growth of the product will decrease and it will enter a maturity stage because there are many producers with many products in the market In turn, this overcapacity leads to greater competition Some strong competitors start to go down prices, grow up their advertising and sale promotions, and increase their Research and Development (R & D) budget to innovate the best versions of the product As a result, the profit is dropped Besides, the weaker competitors begin to lag behind and soon drop out of the industry, eventually containing only well-done competitors

At this period, the company has to run these strategies to maintain their product development The general strategies in mature market are similar to those in growth market; they depend on the relative market position of the product If the product is committed for an extended time period, the objective is usually to invest just enough money to maintain share Although many products in the mature stage appear to remain unchanged for long periods, most successful ones stay alive through continually evolving

to meet changing consumer needs Product managers should do more than simply ride along with or defend their mature products - a good offensive is the best defense

They should stretch their imagination and look for new ways to innovate in the market (market development), or to modify the product (product development) and the marketing mix (marketing innovation)

• Market Development:

Here, the company tries to increase the consumption of the current product or it may want

to reposition the brand to appeal to a larger or faster-growing segment It looks for new users or market segments which the company is not currently serving, as when “clear” targeted the market for men with its shampoo – “clear men” besides the current market

“clear for women”

• Product Development:

The product manager can also modify the product by changing characteristics, such as quality, features or style in order to attract new users and to inspire more usage It might improve the product's quality and performance - its durability, reliability, speed, and taste

Or, it might add new features that expand the product's usefulness, safety or convenience

2.2.2.4 Strategies for decline

Decline stage is defined as the product life-cycle stage in which a product’s sales decline Some characteristics shown in this period as follows: (1) During this stage of any product, sales are diminished and consumers’ taste shifts to a newer or better offering; (2) A decline stage may be gradual or has a sudden drop and continues this way Some decline stages may not continue for too long while others may decline to zero sales and stay at zero During the decline phase, the firm generally has three options: Maintain the product in hopes that competitors will exit Reduce costs and find new uses for the product by giving

a short promotion time to specific segment of target audiences; Harvest it, reducing

marketing support and coasting along until no more profit can be made If in the introduction and growth stages, activities “Above the line” like mass media advertising is used as a key strategy to promote the product, in the decline stage, activity “below the line” like event organization (ex: re-launch product with new label) which costs not much and doesn’t take in a long period is pushing to seize and maximize the revenue as much as possible; Discontinue the product when no more profit can be made or there is a successor product

2.2.3 The product line strategies

Product line management is the work which every marketing manager has to do The product variants may be developed to appeal to different market segments Otherwise, it may be developed to compete more directly with major competition Product lines are also developed in order to gain additional shelf space with distributors (Winer, 2000)

The BCG model is a well-known portfolio management tool used in product life cycle theory BCG matrix is often used to prioritize which products within company product mix get more funding and attention The BCG matrix is shown in Figure 2.3

Figure 2.3: The BCG growths – share matrix

Sources: The principle of Marketing (Kotler 1999)

The two dimensions, market share and market growth, incorporate the following definitions: (1) the market share is defined as relative share: the ratio of the share of your product in the market segment to the next largest competitors (2) Market growth is the

sales growth rate in the served market The dividing line between high and low can be based on grow national product or gross domestic product growth rates, inflation, and more subjective criteria

By dividing the growth-share matrix as indicated, for type of SBU (Strategic business unit) can be distinguished: (1) Stars are high-growth, high-share business or product The often need heavy investment to finance their rapid growth Eventually, their growth will slow down, and they will turn into cash cows (2) Cash cows are low-growth, high-share business or products These established successful SBUs need less investment to hold their market share Thus they produce cash that the company uses to pay its bills and to support other SUBs that need investment (3) Question marks are low – share business units in high – growth markets They require cash to hold their share, let alone increase it Management has to think hard about question marks – which ones they should build into stars and which

on ones they should phase out (4) Dogs are low – growth, low – share, businesses and products They may generate enough cash to maintain themselves, but do not promise to be large sources of cash (Kotler, 1999)

According to Kotler 2000, there are four strategies can be pursued:

(1) Build: the objective here is to increase market share, even forgoing short-term earnings

to achieve this objective if necessary Building is appropriate for question marks whose market shares must grow if they are to become stars

(2) Hold: The objective in hold strategy is to preserve market share, an appropriate

strategy for strong cash cows if they are to continue yielding a large positive cash flow

(3) Harvest: The objective here is to increase short-term cash flow regardless of long-term

effect Harvesting involves a decision to withdraw from a business by implementing a program of continuous cost retrenchment The hope is to reduce costs faster than any potential drop in sales, thus boosting cash flow This strategy is appropriate for weak cash cows whose future is dim and from which more cash flow is needed Harvesting can also

be used with question marks and dogs

(4) Divest: The objective is to sell or liquidated the business because the resources can be

better used elsewhere This is appropriate for dogs and question marks that are dragging down company profits

In conclusion, all companies need strategies to meet changing markets No one strategy is best for all companies Each company must find the way that makes most sense, given its situation, opportunities, objectives and resources Marketing plays an important role in strategic planning It provides information and other inputs to help prepare the strategic plan Strategic plan guides marketing, which must work with other departments in the organization to achieve strategic objectives

3

CHAPTER 3 - THE MARKET ANALYSIS

3.1 MARKETING ENVIROMENT ANALYSIS

3.1.1 Macro-environment analysis

3.1.1.1 State of the world

There was a world dark and complex landscape in 2011, not only in economy but also in politics and society

First, political crisis in North African & Middle East, including Algeria, Egypt, Liberia, and many countries took place extremely complex and serious in the first days 2011 There were many waves of anti – governments and presidents spreading and staying along many weeks

Second, Debt crisis in USA and Euro countries brought about the crisis in bank and growth

in many countries Next, many demonstrations happened due to discrimination policies between the rich and the poor The Occupy Wall Street Protest is a typical example It took place in USA in 17th September, 2011 first After that, it spread in England, German, Italia, Korea, Australia, Japan and other countries

Finally, the multi-polar world is formed Although USA is still the biggest powerful country in the world, it is decreasing the ability threaten other countries China becomes the second powerful country European Union becomes economic agent which bigger than USA Africa Union appears The national association of Southeast Asian is developing, India and Brazil allied

As a result, it makes today’s world overlapping and competing legal rights, the growth of development countries decreasing, the cost of oil, food, raw material, and the high unemployment rate increasing

3.1.1.2 State of economic development in Vietnam

In 2011, Vietnamese economy faced many challenges due to the influence of the world economy and bad monetary policy, budget deficit in high rate, irrational investment structure and economy structure and other reasons Therefore, these brought the following status

First, our economic growth is downtrend in recent years The table 3.1 shows that the GDP

in 2011 was 5.89%, a decrease of 5% from 2010 to 2011and a decrease of 30% from 2005

Sources: IMA Asia Report 2011

Second, high pressure in inflation has created uncertainty in the confidence of consumers and enterprises, which showed clearly in Table 3.1 It can be seen that the rate of inflation increase significantly in recent year In 2011, the CPI in 2011 was 18.1 %, an increase of 63% between 2010 and 2011 and an increase of 118% between 2005 and 2011

Moreover, there was an increase in many filed of society, such as Electric price (15 %), Gasoline price (18 %), in Gas price (4 %), Unemployment rate (2.27%), and Sugar cost (15

%)

As a consequence of these, consumers worry more about their life, consider carefully before spending goods, and cut down the unessential goods while manufacturers face many difficulties in production cost, labor cost, product output, competition in the struggles to gain customers

3.1.1.3 Demography in Vietnam

Vietnam population in 2009 illustrated in Figure 3.1 is around 86 million people and it will add around 1 million per year In addition, Vietnam, a young population, over 50 % of them is under 30 years old It is a convenient condition for youth brands invest in and exploit

Besides, the middle class is growing from 7 million households in 2003 to an estimated 25 million in 2013 It means customers will be willing to spend more money on qualified food and care products Driven by rising incomes and the desire for better living standards, the health and awareness trend in Vietnam is expected to move along with the global trend and continue developing further in the future As most consumers will have better education, together with continuous efforts form the government and manufactures to raise people’s awareness about health issues, they are expected to have better and more sophisticated knowledge about health and wellness, and have higher demand for these products

The target market of this trend, in short-run, however, would remain limited to the major cities, such as Ho chi minh and Ha noi It is because, firstly, they are more highly educated and accessible to updated information about health form various forms of media, including the internet, Secondly, higher disposable income also allows them to afford premium

products with extra health benefits

Figure 3.1: Total Vietnam Population 2009

Source: U.S Central Bureau, International Database, 2009

3.1.1.4 Social trend in Vietnam

Based on the free principles and the open policies (more Vietnamese been to more developed countries, gaining popularity of cable TV channels, tremendous growth of the Internet, popular tourist development, high foreign investment, and improved living standards), there are two main trend of Vietnamese lifestyles

First, most of Vietnamese adopt Western value, such as achievement & success, material comfort, individualism & freedom They also embrace of Western life Watching “foreign” channels on TV, enjoying “foreign” movies are getting themselves familiar with Western food are typical examples Moreover, they trend to incorporate Western consumer trends, for instant, demand for added value products such as health benefits, convenience and quality or develop more sophisticated taste Incorporation of Western consumer trends: demand for added value products such as health benefits, convenience and quality and develop more sophisticated taste Therefore, this is an important factor which firms consider when develop their products and do their positioning and create advertising concept

Second, Vietnamese are quite busy nowadays, so they have a demand of better quality of life and they also desire for a leisure time Hence, it is a golden time for convenience products

In conclusion, Vietnam offers positive business environment for new investments like Poca mainly thanks to Westernization trends and a demand for convenience & quality products However, as products with additional nutrition are in general considered more premium than other products, manufactures must be cautious with the prices they charge Although consumers are willing to pay the extra money for more nutrition, and better quality, price is still one of their top considerations when making a purchasing decision Thus, it is very important not to over-price a product, or it might result in failure no matter how nutritious

it is

3.1.1.5 The government promotes local products

At the beginning of 2009, the Vietnamese government initiated a nationwide campaign called “Vietnamese consumers use Vietnamese products” to promote the consumption of local brands to support the local manufactures in the competition with their foreign counterparts In conjunction with the campaign, many supermarkets/hypermarkets, local

and foreign chains alike, placed many promotions and discount programmers for local brand brands to capture consumer attention while local brands were in the spotlight This further added to the effectiveness of the campaign

From this campaign, it can be observed that the consumers generally prefer local brand, or brands with a local image Thus, for foreign brands to compete with the local brands more effectively, they should find ways to localize themselves

3.1.1.6 Environment concerns

The environmental concern is a rising issue among consumers in Vietnam which deeply affects companies’ reputation and sales growth in many industries, including packaged food In recent years, public media and the government started several campaigns to raise consumers’ awareness about serious environmental problems caused by the rapid industrialization and their long-term negative impacts on the land and the community as a whole This led to changes in perception and actions from consumers, manufactures and governments toward the issue

Therefore, manufacturers are anticipated to take this into their business strategies and turn

it into a competitive advantage In an effort to become more environmentally friendly, companies will invest strongly in the waste filtering/discharging technology Marketing activities, particularly advertisements can be used as a tool to increase the company’s reputation in protecting and improving environment “Green” food products are expected

to become more popular among consumers in the near future

In conclusion, the macro-environment in Vietnam gives many advantages and many disadvantages Hence, Poca snack should take its advantages in build its strategies to gain more customers

3.1.2 Micro – environment analysis

3.1.2.1 Market overview

The sales of package food and Sweet and Savoury Snack rose significantly between 2005 and 2010 According to the Figure 3.2, the sales of Sweet and Savoury snack was about 4,400 vnd billion in 2010, amounted to 4.1% of total packaged food sales Like-for-like sales for 2009 were up by around 16% Moreover, there was a twice increase in sales between 2005 and 2011 from 2129 billion vnd to 4431 billion vnd

Figure 3.2: Sales of Package Food by Category: Value 2005-2010

Sources: Packaged Food – Vietnam, Euromonitor International, November 2010

For each categories, the Figure 3.3 shows that all categories of Sweet and Sauvour snack grew up considerable from 2005 to 2010

Figure 3.3: Sales Sweet and Savoury Snack by Category: Value 2005-2010

Sources: Sweet and Savory Snack – Vietnam, Euromonitor International, November 2010

As can be seen from the figure 3.4, Fruit snacks, chips and nuts are the fastest developed categories from 2009 to 2010

Figure 3.4: Sales Growth of Sweet and Savoury Snack: 2009-2010

Sources: Sweet and Savory Snack – Vietnam, Euromonitor International, November 2010

It is clear form the Figure 3.5 that in 2010 by far the greatest proportion of Sweet and Savoury Snack sales was Extruded Snacks, at 41.9 % Following was Nut, 17.4 % of Sales Chips accounted for another 5.5 % and the rest of other kinds of snacks Compare to 2005, the proportion of Extruded snack and Nuts in 2010 increases considerable Firms should focus more on these segments to improve their sales and market share The extruded snack includes in Potato – based snacks, Prawn & seafood crackers, Rice Crackers, Vegetable crackers and other extruded snacks

Figure 3.5 : Share of Sales Sweet and Savoury Snack by Category 2010 vs 2005

Sources: Sweet and Savory Snack – Vietnam, Euromonitor International, November 2010

Due to the economic difficulties not only in Vietnam but also in the world, the sales of Sweet and Savoury Snack expected to rise gradually 5 years later It can be seen from the Figure 3.6 that the average development rate is about 6 % It estimated to get around 6,000 vnd billion in 2015, an increase of 36 % from 2010 Chips/crisps are expected to see the

- 5,0 10,0 15,0 20,0 25,0 Chips / Crisps

Extruded Snacks Fruit Snacks Nuts Others sweet and savoury

18,5 13,5

21,4 19,0 10,0

4,6

38,7

1,7 13,6 41,3

5,5

41,9

2,4 17,4 32,8

Chips / Crisps Extruded Snacks

Others sweet and savoury

2010

2005

growth in all categories with a CAGR (compounded annual growth rate) of 11% in constant value terms over the forecast period

Figure 3.6: Sales Sweet and Savoury Snack by Category: Value 2011 – 2015

Sources: Sweet and Savory Snack – Vietnam, Euromonitor International, November 2010

3.1.2.2 Distribution trend

Distribution network has become a key factor for companies’ success, particularly in packaged food It has been proven that a widespread and effective distribution system can increase the market coverage of the product, make it more accessible for consumers and certainly raise brand awareness Apart from the traditional retail channels, modern channels such as supermarkets/hypermarkets and convenience shops are focus of companies when it comes to product launches or promotional campaigns To expand packaged food to new areas, various methods are employed by manufacturers including building up their own sales agent system or cooperating with regional wholesalers In Vietnam, the snack distribution has the following characteristics

4.748 5.067

5.386 5.700

6.009

Others sweet and savoury Total sweet and savory snack

Figure 3.7: Total Vietnam Share of Trade

Sources: AC Nielsen Retail Tracking Information 2011

First, traditional trade is still the main retail distribution in Vietnam According to Figure 3.7, It occuped 80 % share of trade in 2011, losing 17.53% point from 2001 According to Ministry of industry and trade, products mainly distributed into the following channel: 40

% markets, 44% grocceries, 16 % others Modern trade is gaining share in retail distribution in Vietnam It makes up 20 %, increase over 500 % vs 2001 According to Ministry of industry and trade, there are 615 supermarkets and 102 shopping centres in 57 provinces Forecast, 2020, it will occupy 40% share

Secondly, Customers do not loyal to any snack brand As can be seen from the Figure 3.8, only 2% people will wait until the favorite brands of snack or confectionery are available and 65 % they will buy another brand if these brands are not available

Figure 3.8: Brand Loyalty

Sources: AC Nielsen Retail Tracking Information 2011

Figure 3.9: Sales of Sweet and Savoury Snack by Distribution format: % Analysis 2005 – 2010

Sources: Sweet and Savory Snack – Vietnam, Euromonitor International, November 2010

Besides, there are different features in each channel, which presented in Figure 3.9 In

particular, Supermarkets and hypermarkets accounted for 26% of sales sweet and savoury

snack in 2010, gaining 10% point from 2005 Moreover, this channel becomes an important channel of distribution for Snack thanks to improve living standards and high

purchasing power in the urban areas Whereas, Independent stores occupied 48.5 % of

sales sweet and savoury snack in 2010, decreasing 7% point from 2005 It has the advantage of competitive price (i.e around 3-5 lower than supermarkets and hypermarkets and better services, and it does not carry such a wide product variety due to limited spaces

and financial capital Small Grocery retailers marked up 54.5 % of sales sweet and savoury

snack in 2010, increase 5% point from 2005 It mainly preferred for low-end products, local products or cheaper imported products

Finally, the penetration rate in Grocery and Special Street Vendors are quite good, which is illustrated in Figure 3.10 Above 78% and 62 % the new brand could penetrate in These are good channels which companies should focus when they would like to launch their new products in the Vietnam market

Figure 3.10: Penetration Rate for each SKU / CHANNEL

Sources: AC Nielsen Retail Tracking Information 2011

Wet / Stall Markets

Street Vendors

Special Grocery

Grocery Leisure

Place

Eduation Special

Street Vendors

In conclusion, Groceries are the key channel which every company should focus on However, supermarkets and hypermarkets is also an important channel nowadays Besides, although the penetration rate in Grocery is high, the rate of brand loyalty is low It means, the company should make sure their products are always available in these channels

3.1.2.3 Competitor information

Nowadays, the competition between local and international manufactures has quickly heated up Since Vietnam holds great potential for this sector, foreign companies could not miss the opportunities in join in, starting with modern snacks like extruded snack or chips Take over cased could not be avoided as in the case of Zich Zich and Zon Zon form An Lac Co Ltd losing share in extruded snack to newcomers Pepsico and Orion While local companies had experiences and deep understandings of local consumers’ taste, foreign players excelled in raising brand awareness and generating sales with their international reputation and strong marketing and PR activities

Figure 3.11: Sweet and Savoury Snack Company Share 2009

Sources: Sweet and Savory Snack – Vietnam, Euromonitor International, November 2010

10,3

8,2 7,6

5 4,8 4,8 4,2 3,8

2,5 2,4 2,2 2,1 2,1 1,9 1,9 1,7 1,6

1,4 1,2

30,3

Tan Tan Food & Foodstuff Liwayway Food Industry Tuyen Ky

Procter & Gamble VN Trang An Tecaworld food

As is shown by the Figure 3.11, there are a lot of companies which joins in the Sweet and Savoury Snack and the share is divided into many parts for not only local companies (Tan Tan, Vinamit, Kinh do) but also foreign companies (Pepsi Co, Liwayway, Orion)

Tan Tan Food & Foodstuff Co successfully sustained its leading position in 2009, accounting for over 10 % of sector value from the figure 3.12; the company was mainly present in nuts, which was certainly not the highest value category Already with a very good reputation in the local market due to its long standing history, Tan Tan continued to gain share in 2009 as nuts continued to outgrow many other categories, such as extruded snacks and chips/crisps Following Tantan was Oishi, a brand of Liliway with 8.2 %

Figure 3.12: Sweet and Savoury Snack Brand Share 2009

Sources: Sweet and Savory Snack – Vietnam, Euromonitor International, November 2010

Tuyen Ky and New Choice, 2 brands of extruded snacks contributed 5.8 % and 4.2 % brand share in 2009 Sachi, a leader in extruded snack, marked up 4.2 % of brand share in Sweet and Savour Snack Sales Poca and Ostar, 2 new foreign brands, occupied 2.4% and 1.2 % They were quite strongly in Chips category

The Vietnam snack Market has strict selections Two years ago, there were 70 snack manufactures with nearly 160 local and international brands However, in the beginning of

10,3

8,2

5,8 4,8

4,2 4,2 2,9 2,5 2,4 2,2 2,1 1,9 1,9 1,7 1,6 1,2 42,1

Tan Tan Oishi Tuyen Ky New Choice Bibica

Vinabico Bimbim Phong Hien Pringles Teppy Ostar Others

1st quarter in 2009, there were only 3 strong snack manufactures which survives in Vietnam, including in Oishi (Liwayway, Philippines), Poca (PepsiCo) and O’Star (Orion) For the nut, the Tantan is still the strong leader in the peanut market

Here are the main competitions of Poca snack in Vietnam Market

Tan Tan Food &Foodstuff Co

Found as a small factory of producing fried peanuts since 1984, Tan Tan continuously attempted to its efforts in reaching and improving technology to make it products better and better for reaching higher and higher needs of consumers

In 2009, Tan Tan successfully sustained its leading position, accounting for over 10% of sector value of Sweet and Savoury Snack The company was mainly present in nuts, which was certainly not the highest vale category However, Tan tan successful built up its position in nuts and with a value share of 62% Tan tan continued to gain share in 2009 as nuts continued to outgrow many other category, such as extruded snacks and chips/crips There are a lot of reason why Tan Tan begins the leader in the Sweet and Savoury Snack in Vietnam Market

First of all, it has a strong distribution Its business to over 140 distributors, over 40,000 retailers, supermarkets and trading centers that has hold 80% of local market share Furthermore, Tan Tan has exported its products to over 20 countries worldwide such as United States, Australia, China, Japan, Russia, Sweden, Hongkong and others countries It means, It products is available everywhere and customers could buy them when they have

a need

Second, it is focus on nut by develop a diversified product range, which presented in the Figure 3.13 Tan Tan produces not only in a lot of taste (nut with coconut, with coffee, with wasabi, with salt) but also in many packing (bag, can, box) and in different weight (10g, 50g, 90g, 155g, 1kg) It is very useful for customer’s choices

Finally, its branding is quite good Consistent packaging and clear position (Nut for adults and Snack for kids) are a typical example

Figure 3.13 Tan tan’s portfolio

Peanut with coconut

Peanut with coffee

Peanut with salt

Kinh Do

Kinh Do was established in 1993 and has gone through 17 years of formation and development Up to now, we, Kinh Do has become a system of corporations in the field of foodstuff including: cake, candy, beverage, ice-cream, and products from milk The development strategy of Kinh Do is to maintain as one leading foodstuff group in Vietnam and orient to become a multi-sector group including: foodstuff, real estate, finance and retail in order to ensure the sustainable development in the future

Products under the Kinh Do trademark are selling in all provinces through a diversified distribution system nationwide including 524 distributors, 31 Kinh Do Bakery shops and 200,000 retail outlets as well as franchised distribution systems with a growth rate of 30%/year The products of Kinh Do have been sold to 35 countries; particularly Kinh Do has conquered the most difficult customers such as Japan, USA, France, Germany and Singapore, etc

As can be seen from 3.14, Kinh do has 2 kinds of snack brand, including Sachi and Slice

Sachi, a tube snack made from potato and wheat flour, is characterized by eye-catching shape, crisp and typical flavor Slide potatoes are made from raw potatoes imported from Malaysia.Slide potato is typical of four flavors including original potato flavor, hot and spicy flavor, barbecue flavor, sour cream and onion flavor

At the beginning of 2010, Kinh Do Corp conducted a nationwide marketing campaign for its newly launched Sachi Extreme taste extruded snack Given the increasingly competitive environment, this could be a wise move form Kinh Do to enhance its position in extruded snacks in particular, and in sweet and savoury snacks in general Because the products with playful images and emphasized its unique spicy favors of chili and wasabi The promotion campaigns new Sachi products for the chance to win a Corby mobile phone and tickets to a party night The unconventional marketing campaign promised success for Kinh Do’s new Sachi products, and sparked off interesting counter activities from other big market players

Figure 3.14: Kinhdo’s Portfolio

Sources: Research report of distribution in Ho Chi Minh, 2011

Orion Food Vina Co

Orion Food Vina Co,, Ltd is one of the most famous confectionery corporations in Korea Manufacturing & trading all kinds of confectionery Orion products are delivered to 65 countries all over the world

Orion is famous for Pie with about 40% market share (Nielsen, 2007) Orion produces 3 main categories, such as Pie with Chocopie and Custar brands, Cracker with Coute’ brand, and Snack with O’star, Swing and Toonies brands in Vietnam market which illustrated in

Figure 3.15 For snack market, Orion is focusing on potato chip with two brands for teenagers (O’star and Swing) and one brand (Toonies) for kids

Although it is trying to build and expand its distribution in everywhere in Vietnam, It has just been strong in 6 cities, including Ho Chi Minh, Ha Noi, Da Nang, Hai Phong, Nha Trang and Can Tho

From July 2011, O’star brand launch a successful marketing campaign for the O’star potato farm in order to create a playground which teenagers and young people could be a true farm people As a result, many young people respond and think that O’star products are from the fresh potato

Figure 3.15: Orion’s Portfolio

Sources: Research report of distribution in Ho Chi Minh, 2011

POTATO CHIP

EXTRUDED SNACK